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Ukraine Leader Consults Putin Amid Crisis

KIEV, Ukraine -- Ukraine's embattled President Viktor Yanukovych returned to protest-hit Kiev on Saturday after holding talks with his Russian counterpart and ally Vladimir Putin about a suspended Moscow bailout loan.

The chat late Friday on the sidelines of the opening ceremony of the Winter Olympic Games in Russia's Black Sea resort of Sochi came amid intensifying pressure from the opposition on Yanukovych to cede some of his broad powers and appoint a new pro-Western government.

Neither Russian nor Ukrainian officials disclosed the details of the two leaders' conversation except to say that it was brief and held at Sochi's Fisht stadium where the Games' opening ceremony was held.

"There was no official bilateral meeting. That was not a part of (the president's) programme," a Ukrainian administration spokesman said by telephone.

Yanukovych had been expected to discuss with Putin the fate of a $15-billion Russian bailout whose delivery has been effectively frozen pending his decision on a new government.

One step above default

The ex-Soviet nation of 46 million was thrown into its worst crisis since independence in November when Yanukovych ditched an historic EU pact under Russian pressure in a stunning reversal that sparked violent protests that have claimed several lives.

The sustained protests that followed have since then played out as a titanic struggle for the country's future between Russia and the West.

Yanukovych must now decide whether to submit to protesters' demands by taking a more conciliatory approach toward a new agreement with the European Union -- a possibility that prompted Russia to suspend its loan payments after issuing just one instalment of $3 billion in December.

But Ukraine's tattered economy is in ever-growing need of assistance amid sliding domestic production and dwindling foreign reserves that can barely afford foreign payments of about $10 billion this year.

The protracted crisis has seen Ukraine's borrowing costs spike and the currency lose nearly 10 percent of its value amid a rush by frightened consumers to cut their losses by stocking up on dollars and euros.

Several banks have reported hard currency shortages and the central bank on Friday was forced to impose capital controls while moving the Ukrainian hryvnia's official rate to 8.7 from 7.9 per dollar -- its first shift of the peg since July 2012.

The central bank's new exchange restrictions include a $5,500 monthly limit on the amount of foreign currency that can be obtained by individuals.

Companies can buy unrestricted amounts of dollars and euros but have to wait at least six days to receive the foreign currency.

The global ratings agency Fitch became the latest to downgrade Ukraine's standing on Friday when it moved its long-term foreign currency debt just one step above default.

Leading Ukrainian lawmakers are expected to meet on Monday to discuss opposition proposals to slash presidential powers and return to a constitution the country had until 2010 that granted extended powers to parliament.

Yanukovych has signalled that he welcomes a discussion of the changes without committing himself to the reform.

US and EU bicker over leaks

No constitutional changes granting lawmakers the power to approve the appointment of all ministers and security chiefs are expected to be voted on before September due to stalling tactics by ruling party members who now dominate parliament.

The simmering tensions in Kiev -- expected to continue on Sunday with plans for another huge demonstration on the capital's iconic Independence Square -- have spilled over into verbal jousting between EU dignitaries and their US counterparts.

One leaked conversation that made a splash on Thursday showed Washington's European envoy Victoria Nuland using the f-word in a private conversation to disparage the European Union's handling of the crisis.

German Chancellor Angela Merkel's office on Friday denounced Nuland's remarks as "absolutely unacceptable" -- a comment echoed on Saturday by European Council president Herman Van Rompuy.

The two sides' woes were compounded when a second tape emerged on Friday showing two top EU diplomats angrily discussing their differences with Washington over possible sanctions against Ukrainian leaders for their rough handling of the protests.

EU officials are expected to discuss but not adopt such sanctions in Brussels on Monday.

US State Department spokesman Jen Psaki denied there was a rift between Washington and Brussels over Kiev while admitting that the situation was "complex".

"We are working closely with them. Do you agree on every component of every step at every moment? Of course not. It's too complex of an issue," she told reporters.

Source: AFP

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